IRS ISSUES GUIDANCE REGARDING BAYH-DOLE AGREEMENTS AND PRIVATE BUSINESS USE

      The IRS has published guidance regarding research agreements and private business use under section 141(b) of the Internal Revenue Code of 1986, as amended (the "Code").  Under Code Section 141(b)(1), not more than 10% of the proceeds of a bond issue are permitted to be used for private business.  This threshold is reduced to only 5% for 501(c)(3) entities such as private colleges and universities.  Rev. Proc. 97-14 sets forth safe harbors under which privately funded research would not be considered as private use.  However, Rev. Proc. 97-14 did not acknowledge the peculiarities of the Bayh-Dole Act.  Under the Bayh-Dole Act, the Federal Government obtains certain rights with regard to the results of federally funded research, which may include the right to grant licenses to third parties.  Thus, questions have arisen as to whether Code Section 141(b) is implicated where a private business obtains a license pursuant to federally funded research that took place at a tax-exempt bond financed facility. 

      Rev. Proc. 2007-47 modifies and supersedes Rev. Proc. 97-14.  The new Rev. Proc. 2007-47 provides that, subject to certain requirements, corporate-sponsored or federally-sponsored research agreements will not result in private business use.  For more information on this development, please contact Todd Ponder or Marilee Springer.